Fertilizer prices and grain exports

By Doug Tenney, Leist Mercantile

The hour clock sand is nearly empty for producers to finish pricing fertilizer needs for 2023 corn and soybeans. “Don’t delay the inevitable,” was a comment heard in regard to locking in fertilizer prices for 2023 crops. The gargantuan drop in natural gas prices the last 4 months has played a significant role in declining fertilizer prices of roughly $100 to $200 per ton. Europe’s winter to date of above normal daily low temperatures has sharply reduced their demand for natural gas, a major contributor for today’s sharply lower natural gas prices. 

Producers continue to express much agony and frustration that fall 2023 corn prices are below those for February by over a dollar in many cases. Corn margins for 2023 are the highest in 3 years, based upon pricing fertilizer in the spring and pricing corn for fall delivery in the spring. This is only one example of corn margin comparisons. For example, if you locked in fertilizer prices the last half of 2020, but did not sell corn until March to August 2021, the margin was sharply different.  

The U.S. export share of world grain exports continues to shrink. We are no longer the dominant exporter of world grains. We play a role, but are not the top dog. The U.S. wheat share of world exports in 2007 was 29%, dropping to 10% in 2022. U.S. soybean exports in 2007 were 40% of world exports, declining to 32% in 2022. U.S. corn exports in 2007 were 62% of world exports, with the steepest decline of the 3 major grains, reaching just 28% in 2022.

Not only is soybean oil being used to make biodiesel, but the aviation industry will be a huge consumer as soybean oil can also be refined into Sustainable Aviation Fuel (SAF). Tests have shown that the modern commercial jets of today see no difference between refined crude oil jet fuel and the most recent processing of soybean oil as the jet fuel of tomorrow.

The ability to process soybean oil as a component fuels, such as biodiesel or SAF has led to a huge market development of gigantic proportions for soybeans in recent years. Numerous manufacturers are jumping into the frenzy as North Dakota is building its first two soybean crushing facilities in history. Those new facilities are among the 23 U.S. soybean crushing plants which are either new or enhancements to current facilities, expected to increase U.S. soybean crushing capacity 26% thru 2025. Costs for each plant can easily be north of $100 million.  

In the upcoming 3 to 5 years, The U.S. looks to become a much more concentrated domestic market with corn and soybeans staying home for U.S. consumption. Gone are the days when soybean processors struggled to find buyers for the lesser of these two products, as a bushel of soybeans yields 10 to 11 pounds of soybean oil and 44 to 48 pounds of soybean meal. 

Chinese customs data detailed that in 2022 China imported 91.1 million tons of soybeans, down 6% from the previous year. The largest imports came from Brazil’s 54.4 million tons of soybeans, down 6% from 2021. The U.S. shipped China 29 million tons of soybeans, down 10% from the previous year.  

The record Brazil soybean production will place stresses not seen in the past for its grain facilities. It will require export shipments to increase in February and March with the vast majority destined for China. Soybean harvest began the middle of January. Producers are most anxious in central and northern Brazil to get soybean harvest completed as quickly as possible so the second crop planted to corn can take place in rapid progression. 

Soybean prices in January reached $15 for the first time in history. Unless demand or weather changes drastically from levels seen the last week of January, expect that March 2023 CBOT soybeans will have great difficulty eclipsing the January highs of $15.48 ½.